Efficiency‐adjusted public capital,capital grants,and growth

A debate on whether capital grants, and especially European Union (EU) funds, actually contribute to growth has gained prominence lately. This article empirically assesses the relationship between the quality of public investment, capital grants, and growth in a sample of 43 emerging and peripheral economies over 1991–2015. To this end, the contribution of public capital to growth is estimated using efficiency‐adjusted public capital stock series, which reflects the quality of public investment management institutions. In addition, the determinants of effective public investment are analyzed. The results suggest that capital grants contribute positively to effective public investment, and the latter is significant in explaining variations in economic growth. Finally, the article illustrates the impact of raising EU funds absorption on potential growth in emerging and peripheral EU countries.     

Public Debt,Economic Growth and the Real Interest Rate: A Panel VAR Approach to EU and OECD Countries

ABSTRACT

We investigate the causal relationship between public debt ratios and economic growth rates for 31 EU and OECD countries. We estimate a panel VAR model that incorporates the long-term real interest rate on government bonds as a vehicle to transmit shocks in both the public debt to GDP ratio and the economic growth rate. We find no causal link from public debt to growth, irrespective of the levels of the public debt ratio. Rather, we find a causal relationship from growth to public debt. In high-debt countries, the direct negative impact of growth on public debt is enhanced by an increase in the long-term real interest rate, which in its turn decreases interest-sensitive demand and leads to a further increase in the public debt ratio.     

The Transatlantic Trade and Investment Partnership and the Role of Computable General Equilibrium Modelling: An Exercise in ‘Managing Fictional Expectations’

Negotiations between the world's two largest trading partners, the European Union (EU) and the USA, on a Transatlantic Trade and Investment Partnership (TTIP) have been ongoing since July 2013. Anticipating the controversy the agreement has sparked, EU trade policy-makers in the European Commission have put considerable effort into discursively framing the agreement on their terms. Drawing on computable general equilibrium (CGE) models of the agreement's likely impact, the central claim has been that the TTIP promises to deliver much-needed ‘growth and jobs’ without stretching the public purse at a time of austerity. Our main argument in this article, drawing on the insights of the economic sociologist Jens Beckert, is that these CGE models – and the figures they have produced – represent an important exercise in ‘managing of fictional expectations’. The models make overly optimistic predictions about the ability of the EU and the USA to eliminate regulatory barriers to trade – which are unlikely to be realised in the face of considerable political opposition – and also downplay the potential deregulatory impact of an agreement. Rather than act as a reliable guide to future outcomes, we thus show that these models serve the pro-liberalisation agenda of the European Commission and other advocates of the TTIP.     

Private savings and transition

After the collapse in the early transition years, saving rates in Eastern European EU‐accession countries have recovered strongly. But is private saving in these countries now driven by the same forces as in the EU? A GMM estimator is applied to analyze the determinants of private saving in both country groups. The main results are: saving rates are rather persistent; income growth increases saving, whereas public saving crowds out private saving. There is evidence that in both country groups domestic saving and foreign capital operate at least partly as substitutes, which is an indicator for international financial integration. The long‐run effects of income growth and public saving are larger in the EU‐15 than in the EU‐accession countries.     

Growth effects of EU and EZ memberships: Empirical findings from the first 15 years of the Euro

One of the major economic reasons for the creation of the European Union (EU) and of the Euro-zone (EZ) was an expected bonus of economic growth for member countries. Whilst several studies exist on the growth bonus of EU membership, there are none for the EZ, the latest and deepest step of economic integration in Europe. The aim of this article is to investigate whether EU and EZ memberships enhance growth for their members. In order to perform our empirical analysis, we estimate different growth models restricting the time frame to the first 15 years of the Euro - from 1999 to 2013. We find a positive impact of EU membership on economic growth, but no impact of being part of the EZ, except during the financial crisis, when the EZ has a negative impact on growth amongst its members. Considering the heated political debate related to the Brexit referendum, our results favour a “yes” to the EU but a less clear answer when it comes to the EZ.     

On the Growth Implications of Foreign Aid for Public Investment Co-Financing

In this paper we present an endogenous growth model with foreign transfers for public capital formation in order to analyze the implications for growth maximization when the public sector in recipient countries co‐finances investment projects. Our main innovation is to show that, first, there is a unique growth‐maximizing absorption rate of funds that decreases with the co‐financing ratio and, second, that high amounts of assistance may be an impediment to growth due to the excess domestic taxation required to co‐finance investment projects. We then derive a policy rule for designing the growth‐maximizing co‐financing share under a given level of assistance. Finally, we also highlight some implications for EU regional policies, which aim at fostering growth in poorer EU countries by co‐financing public capital formation.     

Non-Keynesian Effects of Government Expenditure on Output in Bulgaria: An HP Filter Approach

A large body of recent studies has explored the presence of non-Keynesian fiscal policy effects in advanced European economies, while relevant empirical sources on post-communist economies are scarce. In the context of the constraints imposed by the SGP, it is crucial for EU New Member States and acceding countries to estimate the macroeconomic impact of discretionary fiscal intervention. This article focuses on the effects of government expenditure on short-term output in the Bulgarian economy a few years prior to EU accession. It finds that government investment affects real growth in a Keynesian fashion while transfers and public consumption exhibit non-Keynesian behaviour. The cyclically adjusted components of the general government budget, computed by HP filter, form the basis of the analysis. The results support the conclusions of relevant studies about advanced European economies.     

Economic growth and budgetary components: a panel assessment for the EU

In this article, we test to determine whether a reallocation of government budgetary components can enhance long-term GDP growth in a set of 15 EU countries. We apply panel data techniques to the period 1971–2006, and use three alternative dependent variables in a growth regression: economic growth, total factor productivity and labour productivity. Our results also identify the distortions induced by public expenditure in the private factors allocation. In particular, we detect a strong crowding-in effect associated to public investment, which has enhanced economic growth by boosting private investment. We also associate a dependence of productivity on public expenditure on social security.     

Growth Effects of Fiscal Policy and Debt Sustainability in the EU

In this paper we study the relationship of fiscal policy and economicperformance of some core countries in the EU. Our aim is to find outwhether public deficit and public debt have consequences for real variables in the economies we consider. The background of our empirical study is a growth model that provides us with some predictions on the relationship between fiscal policy and economic growth. In a first step we then use Granger causality tests to analyze empirically whether some of the implications of our model arecompatible with the data. In a second step, we investigate whether the fiscalpolicies of the member states have been sustainable. Given this information,we then pursue the question of whether differences in the fiscal positions ofcountries have consequences as concerns the outcome of our empirical testsof step one. Finally, we study whether the impact of the public deficit ratiodepends on the magnitude of the debt ratio.     

The political economy of Brexit: explaining the vote

The UK’s closely contested Brexit vote to leave the EU is expected to have a significant impact on the UK and EU. While calculating the impact of Brexit is difficult since the UK is still formally a member of the EU, understanding the vote is possible. Leading up to the referendum, public opinion was divided along demographic and economic lines. This article uses referendum results at the local government level to test whether national, racial, religious and economic factors actually influenced the vote. Results indicate that demographic variables played a role while economic variables did not.     

The (lack of) international harmonization of EU standards: import and export effects in developed versus developing countries

This article studies the effect of the lack of international harmonization in agri-food standards on international trade flows focusing on the European Union (EU). The EU is characterized by high level of protectionism, which makes it an ideal case study. We measure the differences in countries’ level of ‘protectionism’ by applying an index of aggregation of non-tariff measures to data on maximum residue levels on pesticides and veterinary drugs allowed by countries on agri-food products. The restrictiveness of countries standards’ is compared with the one imposed by the Codex Alimentarius, which is considered as non-protectionist. The EU emerges as the most rigorous standards setter. The higher standards imposed by the EU affect in particular imports from developing countries, while it facilitates its exports, irrespective of the level of development and standard restrictiveness set by the importing countries.     

The political economy of post-crisis international standards for resolving financial institutions

The development of post-crisis international standards for resolving financial institutions highlights an intriguing puzzle: the European Union (EU), which is often considered as a ‘great financial power’, had a marginal influence in the standard-setting process, which was led by the United States (US) and the United Kingdom (UK). Why? This paper brings together and further develops the concepts of cross-border externalities derived from the hierarchical network structure of the international financial system and domestic regulatory capacity. The US and the UK had the incentives (externalities) to promote and the domestic capacity to shape international standards. By contrast, the EU was mainly exposed to regional (intra-EU) cross-border externalities and lacked regulatory capacity on the matter. Paradoxically, international standards contributed to developing EU resolution capacity by facilitating an agreement on EU (and later on, euro area) rules.     

Fiscal Policy in New EU Member States: Go East,Prudent Man!

The European Union accepted 10 new member states (NMS) in 2004, eight of which were former socialist countries. New members have had to adjust their economic policies to EU standards. Perhaps most difficult has been fiscal policy, where NMS must comply with the Stability and Growth Pact rules. Indeed, four of the eight post-communist NMS breached the SGP limits and were put in the Excessive Deficit Procedure. While the SGP is being modified, fiscal policy is set to remain on the agenda for all NMS.

This article analyses fiscal policy in the eight NMS, focusing primarily on the period immediately preceding their EU accession. The structure and scale of these countries' fiscal policy are analysed and the main trends in the revenue and expenditure of their public budgets identified. Then the dynamics of fiscal policies in the NMS are explored and the main factors in them isolated. The authors show how much of the consolidation was due to the fiscal authorities' effort and how much was caused by external factors. They also show that most NMS governments have run rather inconsistent fiscal policies and have not consolidated their budgets appropriately, postponing politically difficult consolidation measures. However, they also identify a group of countries characterised by strong reform efforts and responsible fiscal policy making, supported usually by strong economic growth. In this context, room is given to economic as well as political economy factors.     

透视国际趋同背景下的欧盟等效会计标准认可

欧盟坚持等效的理念并积极推行"等效会计标准"认可,是基于自身利益考虑和会计准则国际趋同的实际情况做出的理性选择.欧盟已经把美国、日本和加拿大三国列作等效会计标准候选国.我国内地与香港会计准则实现等效有利于今后与欧盟、美国等国家和地区开展会计准则等效工作.我国应坚持"趋同是第一步,等效才是目标"的理念,积极推进我国会计准则国际等效,并力争早日成为欧盟的第四个等效标准候选国家.     

HUMAN CAPITAL FORMATION AND CONTINUOUS TRAINING: EVIDENCE FOR EU COUNTRIES

This paper links data on continuous training from the EU Labour Force Survey (LFS) to information on skill levels and earnings from the EU KLEMS growth and productivity accounts, to examine the relative magnitudes of continuous workforce training versus human capital formation through the general education system in the European Union. The measurement methodology draws from the literature on measuring intangible investments by firms and sources of growth in an accounting framework. The results suggest that in the EU15 group of countries, intangible investments in continuous training represent just under 2 percent of GDP or about 35 percent of expenditure on general education. The share of GDP accounted for by training is less than a third as large in the new member states. A growth accounting method is employed to show that failure to account for continuous training leads to an underestimate of the impact of human capital on output growth in the EU.     

The Impact of Higher Education Funding on Socio-Economic Variables: Evidence from EU Countries

Education is an important vector of smart growth, sustainable development, and economic competitiveness. Higher education plays an important catalytic role in human capital development, and ensures a better insertion of individuals in the socio-economic environment. However, at present, it faces complex challenges in the context of public financing contraction. The aim of our article is to investigate the level of higher education funding and to reveal the impact it has on the socio-economic environment. The novelty of our article resides in the multifaceted analysis we propose combining both qualitative and empirical methods, in the comprehensive sample of EU countries, and in the large time horizon we consider. We first assess the relationship between public financial resources allocated to higher education and socio-economic indicators by means of an exploratory technique, called cluster analysis. Our findings reveal a pattern of similarity among EU countries by building smaller but homogenous groups. We then use the vector autoregressive method to complement the cluster analysis by providing further information on the strength, sign, and causal relationship between government expenditure in tertiary education and several socio-economic indicators. We perform an analysis for each country in the sample. Our findings are mixed, with some countries displaying a greater sensitivity of public financing (channeled to higher education) to changes in socio-economic indicators.     

Reforming the public administration: The role of crisis and the power of bureaucracy

The need to balance austerity with growth policies has put government efficiency high on the economic policy agenda in Europe. Administrative reforms that boost the internal efficiency of bureaucracy can alleviate the trade-off between consolidation and public service provision. Against such a backdrop, this paper constructs (and makes available) a novel reform indicator to explore the determinants of public administration reforms for a panel of EU countries. The findings support political-economic reasoning: An economic and fiscal crisis is a potent catalyst for reforms, but a powerful bureaucracy constrains the opportunities of a crisis to promote reform. Furthermore, there is some suggestive evidence for horizontal learning from other EU countries, and for vertical learning associated with a particular type of EU cohesion spending.     

The innovation impact of the EU Emission Trading System — Findings of company case studies in the German power sector

This paper provides a detailed analysis of how the European Emission Trading System (EU ETS) as the core climate policy instrument of the European Union has impacted innovation. Towards this end, we investigate the impact of the EU ETS on research, development and demonstration (RD&D), adoption, and organizational change. In doing so, we pay particular attention to the relative influences of context factors (policy mix, market factors and public acceptance) and firm characteristics (value chain position, technology portfolio, size and vision). Empirically, our qualitative analysis is based on multiple case studies with 19 power generators, technology providers and project developers in the German power sector which were conducted in 2008/09. We find that the innovation impact of the EU ETS has remained limited so far because of the scheme's initial lack of stringency and predictability and the relatively greater importance of context factors. Additionally, the impact varies significantly across technologies, firms, and innovation dimensions and is most pronounced for RD&D on carbon capture technologies and organizational changes. Our analysis suggests that the EU ETS on its own may not provide sufficient incentives for fundamental changes in corporate innovation activities at a level which ensures political long-term targets can be achieved.     

Economic Growth and Convergence of EU Member States: An Empirical Investigation

The aim of this article is to construct a European production frontier using deterministic methods, and to break down growth and convergence during the period 1980–2001. The results show that EU growth is primarily driven by physical and human capital accumulation, the contribution of which is essential for the cohesion of European countries. We find capital accumulation and efficiency change to be important convergence factors within the EU, while technical change has worked against it. The approach used has also enabled us to analyze the differences in growth performance of Member States and highlight the role of human and public capital, supporting the European cohesion and development policies carried out in this period.     

Do food standards affect the quality of EU imports?

This paper investigates the relationship between the diffusion of EU standards and product quality upgrading using highly disaggregated import data to the EU in the food industry. Results show that, on average, the diffusion of EU voluntary standards boosts the rate of quality upgrading. However, the results are heterogeneous when moving from primary to processed foods, and from ISO to non-ISO standards.